Happiness, policies, and economics
Posted August 26, 2008on:
It is good to see the Frog Blog discussing happiness and policy – as fundamentally the goal of policy should be to promote the highest social happiness, not necessarily to promote the largest GDP number.
The article that Frog links to can be found here, and on Saturday there was an article in the paper by Chris Worthington on the subject as well. However, I get the feeling that Mr/Mrs/Miss Frog interprets this policy implication a little differently to me (and both are different to this previous post) – lets discuss.
What creates happiness.
There are two main areas where I think Frog and myself may have slightly different value judgments surrounding happiness these are:
- Does absolute wealth create happiness – or merely relative wealth (and expectations),
- How does choice and security influence happiness.
Absolute wealth and happiness
I get the feeling that Frog believes absolute wealth is not important – as we get used to this level of consumption and then are not any happier.
Although he does not admit it this is a big steaming value judgment – one that most people would probably not agree with. Am I used to my bad – yes. However, I still believe I am happier in the current situation with a bed then I would be in a situation where I never had a bed.
I do believe that in the search for simplicity, economists often do take on a default pro-growth stance – however, I find the idea of a “no-growth” stance even more confusing, as I am convinced that higher consumption (all other things equal – which is never the case!) does produce higher social happiness. I am not saying that absolute wealth is the only thing that matters (no way) but I am saying that it is a bit extreme assume that it doesn’t matter at all.
Even if these surveys had said absolute wealth did not matter (which they have not), as Chris Worthington says in his article:
self-reported happiness is a highly subjective measure with no guarantee of comparability between different cultures (or different generations). These surveys are also a bounded measure of well-being, whereas potential gains GDP are effectively unlimited, calling into question the logic of mapping one on to the other
Fundamentally – how do we know that peoples reported level of happiness is comparable over time, given that they are biased in reporting it from their current reference point. People may be in a situation where they truly are “happier” – but they may not report that they are.
Sure we “get used” to our level of consumption – but that does not mean that our current, higher, levels of consumption do not make us happy.
Choice and security and happiness
The frog also took a quote from the world changing article:
Whatever the cause, the researchers agree on one thing, the link between wealth and happiness isn’t about consumption. As Stevenson points out, it’s not about going out and buying more, but about having freedom from pain and worry, and having more days of enjoyment and more choice about what you do with those days that’s associated with happiness. So, what policies would give us less pain and more fun?
To Frog this quote implied:
It seems helping people to be happy might be as much about protecting them from the fear of future poverty and want as it is about improving their current economic status
However, to me it implied that a society where people are free to make choices will produce greater happiness.
Insofar as security and choice are complements (the areas where government can increase our liberty) we agree – however, in the areas where there is a trade off between the two I get the impression that Frog will steer more towards security, while I will steer more towards choice.
This is just a representation of our different value judgments – neither is right, and yet neither is wrong.
The point of policy is currently to maximise social happiness – trust me, if the goal was to maximise economic growth many of our policies would be abject failures.
The issue with forming these policies is the subjective nature of happiness – we all have different ideas about what it implies and what the value associated with different things are. That is why we have a democracy – as it allows us an imperfect revealed preference measure of what gives people happiness.
A society that gives people choices, security, and a voice (in some measure) is the type of society that will maximise the happiness of its citizens. This idea is not novel – and it provides the fundamental motivation behind pretty much all social sciences.
As a result, why are we acting as though choosing policies that “maximise happiness” is a new and novel idea?